'Time is of the essence,' as state panel reviews Pontiac schools' finances

A high-level review team has been appointed by Gov. Rick Snyder to review the Pontiac school district's financial records and interview personnel to determine whether the district needs an emergency manager or another remedy for its deficit situation.

"They'll be looking to get started as soon as possible," said Sara Wurfel, spokeswoman for the governor's office.

"They will be visiting the district and doing interviews and will have 60 days as of this announcement" to complete the review, said Wurfel. However, they could ask for a 30-day extension if needed.

"Time is of the essence," she said, considering the new school year will start after Labor Day.

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The financial review team includes representatives selected by directors of key state departments and the speaker of the House and Senate majority leader.

Members, all of whom have expertise in financial operations, include John Baritone, director of the authority finance division of the Department of Treasury; Doug Ringer, chief executive auditor and director of the Department of Technology, Management and Budget's Office of Internal Audit Services; Carol Wollenberg, deputy state school superintendent; Max Chiddister, the nominee of the speaker of the House and president of Chiddister and Associates, and former director of Detroit Public Safety Foundation; John Axe, president of Axe and Ecklund, nominee of the Senate majority leader, who specializes as bond counsel to local units of government and school districts; and finally, Fred Headen, legal advisor for the Michigan Department of Treasury and former director of Treasury's Local Government Services Bureau, who represents other state officials with relevant professional experience.

Under the new state Emergency Manager Act, the governor appointed the review team after the state Department of Treasury Local Emergency Financial Assistance Loan Board found "probable financial stress" exists within the Pontiac school district after reviewing a report from state school Superintendent Michael Flanagan.

Under the new emergency manager act, the finding requires the Governor to appoint a financial review team.

If a financial emergency is eventually found to exist in a local unit of government, local officials determine how the crisis is remedied by selecting one of four options: a consent agreement; an emergency manager; a neutral evaluation process; or Chapter 9 bankruptcy.

Flanagan's findings came from a preliminary review of the Michigan Department of Education, which found many problems, including the fact that the deficit has increased by millions to $37.7 million by the end of 2012 even while the district was supposed to be following a state-approved deficit elimination plan.

Also, Flanagan noted the fact that the district had not paid employee health insurance premiums amounting to $7.8 million and now taxpayers have been ordered to pay that bill off over a 10-year period.

Pontiac school district's interim Superintendent Kelley Williams and Board President Caroll Turpin were not available for comment Wednesday afternoon.

The announcement of the financial review team came the day after Snyder signed a bill approved by the Legislature that provides for dissolving of districts of 2,500 students or less if they do not have enough money to operate through the school year.

Legislators were also planning to include the 5,000-student Pontiac school district in the bill, but decided against including larger districts after hearing testimony from Oakland Schools Superintendent Vickie Markavitch, who proposed that intermediate school districts operate larger districts that are in trouble for a few years until they are turned around and can operate on their own again.

It is unclear whether legislation will be proposed to create this type of interim takeover when the Legislature is back in session.

In an effort to be proactive, Snyder on Tuesday announced the creation of the Advisory Work Group on Financial Accountability for Schools to examine and better identify early warning signs of problems in districts, Wurfer said.

"The overwhelming majority of Michigan's school districts are managed well, but a handful aren't," Snyder said at a news conference.

"When a school district no longer is able to do its job and educate our children, then we must be able to act quickly to get those students in other classrooms," the governor said.

The Advisory Work Group primarily will be comprised of representatives from educational organizations and groups and schools.

"We're bringing together people from across the state. Their assignment is to identify the early signs that a district is having issues that could develop into serious problems and affect the education of students.

"From there, we'll be able to work together and find tools and ways to help these kids and districts," the governor said.

The group is expected to begin meeting in mid-July and finish its work and recommendations by the beginning of the new school year, Sept. 3.